Brexit: Three Possible Outcomes and What They Would Mean for the Entertainment Industry

The model the U.K. ends up choosing after its divorce from the European Union will determine how much, or how little, changes for the film industry.

Now that the initial shock of the U.K. vote in favor of a Brexit has passed, minds are turning to Britain's future relationship with the European Union.

The new British prime minister Theresa May has been elected by the Conservative Party to take over from David Cameron and will be expected to trigger Article 50 of the Lisbon Treaty, the notice that starts official Brexit negotiations. Britain will then have two years to sort out its legal relationship with the EU, including such delicate topics as free trade, copyright law and freedom of movement between the U.K. and the EU.

There is no exact precedent for the Brexit — no EU founding member has ever left the union — but most analysts expect the U.K. will end up with a version of one of three existing models: the Norwegian, the Swiss or the Turkish. The model Britain picks will have a major impact on what does, or doesn't, change after the Brexit.

Here's a breakdown of the three models and what they would mean for business, including the film and TV business.

The Norwegian Model
Norway is not in the EU, but is a member of the European Economic Area (EEA), so it has full access to the EU market. In return, Norway contributes to the EU budget and follows almost all EU laws (it has exceptions for fishing and farming), even though it doesn't have a say in how they are made.

“They used to call it government by fax, now it's probably government by email,” says Bertrand Moullier, an independent analyst with Narval Media. “You live by a set of rules while having no influence over them.”

Under the Norwegian model, very little would change for the film and TV industry — U.K. producers would still have access to EU subsidies, U.K. productions would still qualify under EU television quotas and U.K. talent would still be considered European, and could travel freely throughout the region.

The U.K., however, would have no say in major matters concerning the film and TV industry, including the adoption of a digital single market across all EU countries — something many worry could dismantle the financing models for independent film in Europe — or the push to harmonize copyright law across the EU. The country would have to accept whatever laws Brussels decides on.

But the main problem is political. To qualify for the Norwegian model, the U.K. would have to accept most tenets of EU law, including, most problematically, freedom of movement for all EU citizens.

“Freedom of movement is a huge issue in the U.K., most pro-Brexit politicians campaigned to end it,” says Ted Shapiro, partner and head of the Brussels office of Wiggin, a law firm specializing in intellectual property law. “It's hard to imagine, politically, how the U.K. would manage to adopt the Norwegian model.”

The Swiss Model

Switzerland is outside the EU and the EEA, but is a member of the European Free Trade Association (EETA). As such, the Swiss negotiate access to the European single market on a sector-by-sector basis. Swiss courts, for the most part, are not bound by EU rulings. The Swiss, however, do accept freedom of movement for EU citizens in Switzerland.

The Swiss Model could be a nice fit for the U.K., giving it access to EU markets with less regulatory control and a smaller contribution to the EU budget. Similar to the Norwegian model, a Swiss-style Brexit would mean few real changes for the film and TV industry, other than Britain losing its place at the table for future negotiations.

Theoretically, the U.K. could even carve out special conditions for the industry — allowing bigger tax breaks for film production, for example, something that might otherwise be blocked as anti-competitive by the EU.

Moullier, however thinks it is “highly unlikely” that the U.K. could cut its own, more favorable deals with the EU to benefit the film industry. “The U.K. mainly wants the EU to be flexible on movement of people, which will mean the U.K. will have to be even more flexible on everything else," he explains. "The industry could be held hostage to the politics of immigration.”

Moullier notes that the EU is already threatening to cut off market access to Switzerland if it goes ahead with plans to cap EU immigration. If the U.K. pushes for better conditions for its entertainment industry, the EU could push back, cutting access to any number of schemes that would hurt other aspects of the British economy.

The Turkish Model

Turkey is not in the EU or part of the European common market, but is a member of the EU's customs union, meaning Turkish exports to the EU are tariff-free, but Turkey does not have to accept freedom of movement of EU citizens. The Turkish model, however, contains several exceptions, including for services and public procurements.

The Turkish model would satisfy the anti-immigration demands of most pro-Brexiters — EU citizens would not be allowed freedom of movement to the U.K. — and would still give access to the EU market. But U.K. citizens would no longer be able to travel and work visa-free throughout Europe, making cooperation on film and TV production more difficult and more expensive. It is doubtful whether U.K. producers would have access to EU subsidies in the same manner they do now, and their films and series would likely not qualify under EU television quota laws.

The U.K., however, could still tap some EU co-production and distribution funds. It could even rejoin Eurimages, the film fund which doles out around $27 million a year for co-productions and which Britain left in 1996. Turkey is a member of Eurimages, despite being outside the EU. Roberto Olla, executive director of Eurimages, said post-Brexit that the U.K. would be “welcome to come back any time.”